State-owned banks' bad loans manageable

The economic slowdown, a rise in interest rates and aggressive lending in good times led to a sharp rise in bad loans

Economic Survey 2012-13 said gross non-performing assets (NPAs) of public sector banks were at manageable levels. However, to avoid an adverse impact on balance sheets, these had to be monitored, the survey added.

The economic slowdown, the rise in interest rates and aggressive lending in good times led to a sharp rise in bad loans. A switchover to system-based identification of NPAs by state-owned banks also aided the rise in stressed assets.

A few industry and infrastructure sectors are recording a rise in NPAs due to the slowdown and the high leverage levels. Sectors particularly under stress include textiles, chemicals, iron & steel, food processing, construction, and telecommunications.

Overall NPAs of the banking sector rose from 2.36 per cent of total credit in March 2011 to 3.57 per cent in September 2012. Gross NPAs of public sector banks rose from Rs 59,972 crore in March 2010 to Rs 1,44,437 crore in September 2012.

The survey said banks had taken various steps to address rising NPAs. They have appointed nodal officers for recovery at various levels (head offices and zones). Nodal officers have also been appointed for each debt recovery tribunal. Banks are also looking for early warning signals on the NPA front and ensuring timely corrective steps.

Banks had also designated asset reconstruction companies and resolution agents, the survey said, adding they were conducting sector- and activity-wise analyses of NPAs. Recoveries by public sector banks increased from Rs 9,726 crore as of March 2010 to Rs 17,043 crore a year later.